Microsoft, Motorola FRAND Clash Goes to Trial

Patents have become corporate weapons, and courtrooms are the battlefields in a long, drawn-out war over how to determine fair, reaonable and non-discriminatory licensing rates for technologies that competitors must share. The possibility that the judge in the high-profile Microsoft v. Motorola trial may determine the FRAND rate himself could lead to a new legal precedent.

A Microsoft lawsuit against Motorola Mobility went to trial on Tuesday in Judge James Robart's U.S. District Court of Western Washington's courtroom. The case is focused on allegations made two years ago by Microsoft that Motorola Mobility demanded unreasonable royalty rates for its patented wireless and video standards standards-essential technologies.

Motorola had demanded that Microsoft pay 2.25 percent of the price of each product implementing the standards. Microsoft's position is that it should only have to pay 5 US cents per product.

Because there is no established methodology for setting a
FRAND rate for licensing patented tech, Robart has decided to case in a two-part trial. The first part will be to determine the royalty; the second will be to consider whether Motorola was unreasonable in setting the 2.25 percent rate.

Tweeting the Trial

A flood of tweets from the packed courtroom sometimes focused on the significance of what might appear to be minor details, reflecting the high stakes in this particular trial.

"Microsoft assoc gen counsel Andy Culbert clearly playing imp role in #motosoft case. Sitting up with trial attorneys, not just in audience," noted Mike Swift ‏@Swiftstories, for example.

A Growing Controversy

Companies have increasingly been debating the question of what constitutes fair, reasonable and non-discriminatory (FRAND) terms for a particular patent -- and in the case of Apple and Motorola, they've been arguing it in courtrooms.

Last week U.S. District Court Judge Barbara Crabb dismissed a suit filed by Apple against Motorola Mobility, with prejudice.

The arguments Apple made against Motorola are similar to Microsoft's: Apple also alleged that Motorola abused its standard-essential patents by demanding 2.25 percent of the product price as royalties. Apple maintained that the court should set a rate of $1 or less per Apple device.

However, it also noted that it would proceed with further litigation in the event the court made an unfavorable ruling, and that figured largely in the judge's dismissal.

Precedent-Setting Possibility

The different proposed fees for using these patented technologies -- 5 cents versus $1 -- illustrate how subjective setting a FRAND rate can be. Certainly a value needs to be assessed before such a case can go to a jury; hence Robart's decision to set the rate himself.

"A move like that could lead to a precedent," Peter Toren, an attorney with
Weisbrod Matteis & Copley, told the E-Commerce Times.

On one hand, it could be an easy way to define FRAND terms to come up with a reasonable license fee. On the other hand, it could lead to increased litigation.

"I don't imagine that judges in popular patent circuits would be thrilled with that," Toren said. "Courts in Delaware, Virginia, Texas and central California could easily become overwhelmed."